Kingfisher Airlines, the merged airline operations of Kingfisher Airlines and Deccan Aviation, is looking to raise $400 million through equity, possibly by March 2009. The announcement comes nearly eight months after UB Holdings-owned Kingfisher Airlines announced that it will raise $300 million, a move which has not yet fructified.
Liquor baron Vijay Mallya, who owns the airline, said on Tuesday the company planned to raise $400 million and the instrument for this was yet to be finalised. “A rights issue is also an option, which is open to us,” he said.
UB Holdings controls around 65 per cent in the merged aviation company. The company has been trying to raise equity to fund its operations for quite some time as there is hardly any private equity investor willing to risk his money at high valuations, an industry analyst noted. The company currently has a debt of around Rs 4,000 crore and the combined losses are close to Rs 2,500 crore.
“Earlier, we tried to raise $300 million, but due to adverse market conditions, we have deferred this. Now, we are targeting $400 million to run the operations,” Mallya noted on the eve of the launch of Kingfisher Airlines’ international operations.
Kingfisher will fly non-stop to London from Bangalore. It has also planned a non-stop flight between San Francisco and Bangalore. Mallya expects the Bangalore-San Francisco flight to take off from November this year.
He is optimistic that his company will break even in 18-24 months as it is already seeing synergies from the merged operations. Mallya claimed that the initial international flight, to and fro, on the Bangalore-London route will have a load factor of around 70 per cent and will be profitable on a flight-to-flight basis.
“Global crude oil prices coming down is helping,” he said, adding Kingfisher Airlines will not be dropping prices as a result.
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During the press meet, Mallya took pains to explain that the Deccan brand has not been changed to Kingfisher Red, but Kingfisher Red will be a class of service that will be akin to Deccan’s legacy of low-cost service. “All our aircraft will be branded Kingfisher and will have three different classes – Kingfisher First (business class), Kingfisher Class (economy) and Kingfisher Red,” he detailed.
Dwelling on the government’s support to the growth of the aviation industry, he said the government has reduced the sales tax on aviation turbine fuel. “For example, Hyderabad slashed this sales tax from 32 to 4 per cent as soon as the GMR International Airport was opened, which immediately saw the frequency of international flights going up. Maharashtra is also actively mulling to reduce the sales tax, but the Karnataka government is in no mood to take this step,” he said.